Author Topic: AirBnB and Taxes  (Read 1305 times)

CanuckExpat

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AirBnB and Taxes
« on: July 12, 2014, 11:30:18 PM »
Hi Everyone,

We moved earlier this year, and have since then been occasionally renting out a spare bedroom on Airbnb
Has been a good experience so far both between the interesting people and the extra money.

I've started to wonder ahead about the tax consequences. The extra money doesn't sound quite as nice when I think about paying the full marginal federal and state income taxes on it, so I think claiming the appropriate allowable deductions will be important.

I think the definitive guide would be here: http://www.irs.gov/pub/irs-pdf/p527.pdf
I'm also wondering about specifics. We've always done our taxes ourselves using software.. going forward will this make it complicated enough that we will have to get an account? Does anyone have any experience and input?

Thanks
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Jtrey17

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Re: AirBnB and Taxes
« Reply #1 on: December 06, 2017, 09:47:39 AM »
Responding to this old question in the hopes that someone might now know the answers. I am also considering an AirBnB above my garage and am curious about tax implications...anyone??

afox

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Re: AirBnB and Taxes
« Reply #2 on: December 08, 2017, 09:29:35 AM »
In addition to income tax you will have to pay capital gains taxes on the house when you sell it, the percentage of the house that is subject to capital gains is calculated by the percent of the home (based on sq. ft) multiplied by teh number of months you rented it.

Also, you will need to upgrade to a HO insurance policy that covers "short term rentals", "bed and breakfasts". 

MJseast

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Re: AirBnB and Taxes
« Reply #3 on: December 08, 2017, 09:30:41 AM »
2017 is my first year AirBnbing, so I don't know for sure, but as I understand it I will receive a 1099 from them and I will have to claim it as income, just like a rental property. I believe that means I can deduct certain costs associated with the rental, such as bedding I bought specifically for the room. I'm also hoping I get to take a deduction for the actual room itself, since it is used solely for AirBnb (kind of like the home office deduction). Again, much of this is speculation since I haven't gone through it yet. I have someone do my taxes for me so I will ask them.

One additional question that I just started to research: Can I run the income through my LLC (it's a generic 1-person consulting company) and use the earned income from AirBnb to count towards a Solo-401k?

I also just found this doc that answers many of the tax questions: https://assets.airbnb.com/eyguidance/us.pdf

Thanks!

jwright

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Re: AirBnB and Taxes
« Reply #4 on: December 08, 2017, 10:49:47 AM »
The EY document is a good guide.

Generally speaking, Airbnb sends a 1099 and you deduct the related expenses.  Expenses 100% related to the rental unit are 100% deductible, other expenses that apply to your whole house may be prorated to find a deductible portion.  You can deduct depreciation of the rental portion.  This will come back to haunt you at the sale of your home because a portion of your gain will be treated as depreciation recapture taxed at ordinary income rates up to 25% rather than capital gain rates.  Also, the rental use will disallow some or all of the gain exclusion enjoyed by sellers of their primary residence.

You cannot combine the rents earned with other self-employment income because rental income is treated as unearned (unless you are a real estate professional) versus earned.  Not eligible for 401k contributions.

tralfamadorian

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Re: AirBnB and Taxes
« Reply #5 on: December 08, 2017, 03:31:23 PM »
You cannot combine the rents earned with other self-employment income because rental income is treated as unearned (unless you are a real estate professional) versus earned.  Not eligible for 401k contributions.

I don't believe this is true for short term rentals. Average rental length of less than 7 days is treated as active income by the IRS and is subject to self employment taxes/reported on Sch C. This can also be true of average rental length of >7, <30 days. A good write up on the subject-
https://www.therealestatecpa.com/2016/10/20/avoiding-tax-traps-short-term-rentals/

CanuckExpat

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Re: AirBnB and Taxes
« Reply #6 on: December 08, 2017, 03:35:37 PM »
I think it depends on your circumstances. If it is AirBnB of a room in your house, for multiple visitors, short periods of time, you are doing all the management, other things (changing sheets and cleaning) that pretty much sounds like active income to me
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Tobias

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Re: AirBnB and Taxes
« Reply #7 on: December 10, 2017, 12:27:18 AM »
I believe AirBnB doesn't send you a 1099 form unless you make $20,000 or more, and have at least 200 separate guests. Most hosts won't make the latter requirement unless they have multiple listings.

Anecdotally, I believe some small-time hosts do not claim the income from AirBnB on their taxes and hope they are not audited.

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